The sludge in the glass jar on David Nelson's bookshelf here is thicker than molasses and was once thought worthless. But the Chevron Corporation, whose operations he runs in eastern Venezuela, has spent about $1 billion turning what was once called liquid coal into oil, helping transform a swath of scrub grass into a great frontier for oil production.

The region, the Orinoco Belt, is in fact so promising that President Hugo Chávez of Venezuela says it contains up to 235 billion barrels of recoverable oil; if true, the reserves would rival those of Saudi Arabia.

"We do know that the Orinoco is underdeveloped," said Mr. Nelson, 49, a geologist from California with 27 years' experience developing heavy-grade oil. "And the resources in the Middle East are at their midpoint."

This great, largely untapped treasure is pitting a leftist government aiming to use oil revenue for social programs against multinational corporations like Chevron, which were invited here a decade ago to develop the Orinoco Belt, a 54-square-mile area some 120 miles south of here.

With demand rising, worldwide supplies threatening to decline and oil prices near record levels, the struggle in this country underscores the growing debate between governments and oil companies worldwide over profits from technologically challenging but potentially lucrative oil fields — whether in the Caspian Sea, the Arctic tundra or here in the Orinoco region.

Venezuela will be the host for an OPEC meeting on June 1, where Mr. Chávez can be expected to emphasize his country's vast potential. It clearly has a lot to gain from the Orinoco, where daily oil production has slid to 2.6 million barrels, from 3.3 million barrels five years ago. To underline the region's potential, President Chávez has asked oil companies from as far away as China and Russia to certify the size of the hefty reserves.

Saudi Arabia, still the giant among world oil suppliers and the leading force in OPEC consultations, scoffs at such boasts.

Yet, what is under the ground here in Venezuela, the Western Hemisphere's largest oil-exporting nation, has become so valuable that companies throughout the world want to drill for more, and Mr. Chávez, who regards his government as revolutionary, wants it to have a larger slice of the earnings.

In Venezuela, foreign companies including Exxon Mobil, Chevron, ConocoPhillips, BP and Total of France could lose once-favorable terms and in essence be forced to transfer up to $8 billion in value to the government, just as some opportunities elsewhere are drying up.

The big oil companies are right to be rattled. In April, Mr. Chávez's populist government took control of 32 mostly marginal oil fields across Venezuela that had been managed by foreign concerns. Then on May 16, the National Assembly raised royalties on the four heavy crude oil projects of the Orinoco to 33.3 percent, from 16.6 percent, and is planning to increase taxes to 50 percent, from 34 percent.

The government says it is preparing to capture a bigger stake in the Orinoco — turning control of projects that produce 600,000 barrels a day over to Venezuela's state oil company, Petróleos de Venezuela. Energy officials say the government could take up to 60 percent control of the so-called strategic associations, as the projects are called. No timetable has been laid out, but leaders in the National Assembly, which is controlled by Mr. Chávez's forces, say it is only a matter of time.

"With the high price of petroleum on the market, we are going to share in the excess earnings of the strategic associations," Mario Isea, president of the assembly's hydrocarbons commission, which is allied with Mr. Chávez, said in an interview. "They have gone years without paying royalties and effectively paying commercial taxes instead of petroleum taxes."

In the mid-1990's, President Rafael Caldera's government, eager to develop oil discovered in the 1930's, opened the region to foreign investment because the state oil company had neither the capital nor the technology to develop the Orinoco's semisolid sludge. Oil prices were low, world supplies easily met demand and Venezuela had on its hands a crude oil so heavy, so filled with impurities, that it was not even known as oil, but rather bitumen.

But then, given a virtual tax holiday intended to stimulate investment — the royalty rate was 1 percent — the multinationals embarked on a process of drilling and, more recently, upgrades that permit refining Orinoco crude oil into a lighter, marketable product.

In the Hamaca field, an area the size of Houston that produces oil for Chevron, ConocoPhillips and the Venezuelan state company, oil now slurps through an octopus-like system of horizontal wells that reach out as far as 8,000 feet.

The drill bits are equipped with sensors that emit seismic signals measuring what they are passing through — whether rock, sandstone, fine shale, sand or clay.

"Obviously, we'd love to find deposits with sweet light crude in shallow fields," said Mr. Nelson, who carefully explains the complex challenges his company faces. "That's not where energy resources are, so we have to adapt."

Back in a control room near his office in this Caribbean port, geologists and engineers monitor wall-size screens and make quick decisions whether the drill needs to bore ahead, or move up or down.

The idea is to have the drill moving fast, at hundreds of feet an hour, into blue-shaded patches, which signal porous material that would contain crude oil.

"Our goal is to first find sand and once we find it, stay in it," said Mike Waite, a senior geophysicist who leads the team monitoring the drilling.

Just west of here, gunk from the Orinoco is turned into oil at the Jose Industrial Complex, a virtual city of pipes, water-treatment lagoons, smokestacks, pits and storage tanks. Since the first shipment of Hamaca oil left aboard the tanker Overseas Sophie two years ago, the project has produced an average of 180,000 barrels a day.

Mr. Nelson said the project, among the most intricate in the world, is worth it, "but you have to put some elbow grease into it."

"These projects are big," he said. "They're complicated. They have a lot of moving parts. You have a lot of complicated negotiations with governments. It's not a business of instant gratification."

All told, according to a recent Deutsche Bank report on the Orinoco projects, $17 billion has been invested, about $3.5 billion in the Hamaca project alone. Big energy companies, including some from Brazil and China, would like nothing more than free rein to ramp up investments and produce more.

Ali Moshiri, Chevron's Latin America exploration and production group chief, said in April that Venezuela needed $200 billion to develop the heavy oil reserves.

"There's a sense of urgency, not a sense of luxury," said Mr. Moshiri, who predicted that 90 percent of Venezuela's production would come from the Orinoco in the years ahead.

The government, to be sure, talks of increasing production to 5.8 million barrels a day by 2012, from 2.6 million barrels now. But Venezuela, which as a leading voice in the Organization of the Petroleum Exporting Countries has advocated a particularly tough form of oil nationalism, wants to achieve this on its own terms.

Its energy minister, Rafael Ramírez, who is also the president of Petróleos de Venezuela, said in an interview that the deals that multinational companies signed with the government in the 1990's were "absurd," giving Venezuela little in return.

"They are beholden to their stockholders, and we are beholden to our country," Mr. Ramírez said.

Venezuelan officials contend that exploration and production in the Orinoco has become easy, even risk-free, with a barrel of oil costing less than $1 to produce, down from $2 in 1995.

Energy officials here assert that the multinationals exaggerated the technical challenges and costs, swindling the state.

They also argue that the companies have made extraordinary profits — and will continue to do so even with higher taxes and royalties.

"They have made a fortune," said Mr. Isea, the president of the hydrocarbons commission. "This remains an excellent business. I do not think anyone will leave."

Venezuelan officials say their measures are enshrined in a 2001 law that says the state oil company must have a 51 percent stake in projects; they sidestep questions about previous contracts being grandfathered in.

Mr. Ramírez and lawmakers also say that a 1945 hydrocarbons law permits the government to raise royalties when the price of oil goes up.

The foreign companies, trying to avoid controversy, do not publicly dispute the Venezuelan government's statements. But Larry Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported analysis group in New York, said: "In Venezuela today, I don't believe contracts have meaning. And it affects the production, no matter what the Venezuelans say."

The game of oil brinkmanship continues, with Mr. Ramírez saying that the companies have few options.

"It's no secret for anyone that the big deposits, the giant ones, are finished," he said. "There are no new oil regions that compare to the Orinoco Belt."

The recent Deutsche Bank report agreed, saying that "few are likely to quickly turn their backs on reserves of the order seen in Venezuela."

"They may not like Chávez," the report added. "They may not like his regime. But they also know that he has probably done as much to support high oil prices through his rhetoric and posturing as any individual. This president is no fool. And at the end of the day, you go where the oil is."

Jens Gould contributed reporting from Caracas, Venezuela, for this article.

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